EBRD cuts growth forecast as Iran war drives energy crisis

The European Bank for Reconstruction and Development on Tuesday slashed its 2026 growth forecast to 3.1% from 3.4%, identifying the Middle East conflict as the principal shock to economic stability across its territory from Central Europe to Central Asia.

Energy costs and trade disruptions

The institution's latest Regional Economic Prospects report — titled "Strai(gh)t talk" — attributes the slowdown to rising oil and gas prices, disruptions to shipping through the Strait of Hormuz, and the widening gap between European and US energy costs that weighs heavily on industrial competitiveness. Amid sharply higher US import tariffs imposed during 2025 and rising global trade tensions, the expansion of AI-related supply chains continues to underpin growth globally, with EBRD economies recording faster growth in AI supply-chain exports.

Regional underperformance and inflation

Year-on-year growth across the EBRD regions reached only 2.9% in the first quarter of 2026, with weaker-than-expected results recorded in Egypt, Kazakhstan, Romania, Türkiye and Ukraine, the bank said. Nearly two-thirds of EBRD economies have introduced consumer support measures including energy tax cuts and targeted subsidies, the bank noted, as average inflation jumped 1.2 percentage points to 6.4% between February and April 2026 on the back of higher energy and food prices. Currency depreciation against the US dollar has added further pressure in some economies.